Orders for long-lasting U.S. manufactured goods fell in February as companies scaled back investment plans for a second month in a row, suggesting a cooling off in business spending.

Other data on Thursday showed the labor market's recovery was becoming well-established, with new claims for jobless benefits falling last week and the four-week moving average dropping to its lowest level in more than 2-1/2 years.

Economists said while the weak manufacturing report posed a risk to first-quarter growth, they cautioned against placing too much weight on it, noting the data was in stark contrast to other upbeat surveys on factory activity. Data on durable goods orders is also very volatile.

If the numbers continue to be soft, that would be something to be concerned about, but we are seeing very strong manufacturing numbers from other reports, said Robert Dye, a senior economist at PNC Financial Services in Pittsburgh.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 1.3 percent in February after a 6.0 percent drop the prior month, the Commerce Department said.

Economists had expected the business spending gauge to rise 4.5 percent last month.

The weakness in business demand and a big drop in defense aircraft orders helped pull down overall orders for so-called durable goods, items meant to last three years or more, by 0.9 percent. They had risen 3.6 percent in January.

CLAIMS FALLING

A second report from the Labor Department showed initial claims for state unemployment benefits slipped 5,000 to a seasonally adjusted 382,000, a touch below economists' expectations for a fall to 383,000.

The four-week moving average of new claims -- a better measure of underlying trends -- dropped 1,500 to 385,250, the lowest since mid-July 2008.

It was the fourth straight week the closely watched average held below the 400,000 level that economists associate with steady job growth.

Until recently the economy's job production had been dismal. But in February, employers hired 192,000 new workers, the most in nine months.

The Federal Reserve has acknowledged the labor market is improving but nonetheless appears ready to complete its planned purchase of $600 billion in government bonds to help ensure recovery.

We are still in a range that suggests job growth of around 200,000 per month, not quite yet to the level you need to be able to get 250,000 to 300,000, which is where the Fed wants to be on job growth, said John Canally, an economist at LPL Financial in Boston.

Some economists cautioned that the devastating earthquake and tsunami in Japan and rising gasoline prices could dent business confidence and cause companies to delay hiring.

The data had little impact on U.S. financial markets, where stocks rose amid optimism about corporate earnings. U.S. government debt prices slipped, while the dollar fell against the euro on hopes European policymakers would be able to contain a political and debt crisis in Portugal.

Signs the labor market recovery was taking hold were underscored by a drop in the number of people still receiving jobless benefits under regular state programs after an initial week to a 2-1/2 low in the week ended March 12.

This data for so-called continuing claims covered the week for the household survey from which the U.S. unemployment rate is derived. The jobless rate dipped to 8.9 percent in February from 9.0 percent in January and has dropped 0.9 percentage point in the past three months. (Additional reporting by David Lawder; Editing by Andrea Ricci and Dan Grebler)

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